Economic Report: U.S. consumer sentiment drops to 11-month low in August

People walk through the Oculus transportation hub and shopping mall in lower Manhattan on July 27, 2018 in New York City.

The numbers: The University of Michigan said its consumer sentiment index in August fell to 95.3, down from 97.9 in July, the lowest level in 11 months.

Economists polled by MarketWatch expected a reading of 98.5.

What happened: The decline was concentrated among households in the bottom third of the income distribution, the University of Michigan said. And the concern was rising prices.

Buying conditions for large household durables, which include items such as furniture, cars and appliances, sank to the lowest level in nearly four years, the University of Michigan said, and for vehicles in particular the worst in the last four years.

Home prices meanwhile were judged less favorably than anytime since 2006.

The big picture: This is the first time in a while where perceptions of inflation really impacted the report. That said, the one-year anticipated inflation rate stayed at 2.9%.

Interestingly, while current conditions dropped sharply, the index of consumer expectations stayed at 87.3, perhaps as the unemployment rate was just 3.9% in July.

What they’re saying: “The data suggest that consumers have become much more sensitive to even relatively low inflation rates than in past decades. As is usual at this stage in the business cycle, some price resistance has been neutralized by rising wages, although the falloff in favorable price perceptions has been much larger than ever before recorded,” said Richard Curtin, the survey of consumers chief economist. He said that’s good news for the Fed, since interest rates now play a more decisive role in purchase decisions.

Market reaction: The Dow Jones Industrial Average DJIA, +0.06% wasn’t moving much on Friday. The threat and imposition of tariffs has limited stock market gains this year, as the Dow has climbed 3.4% through Thursday.